Venture capital investment in European financial technology companies reached its highest level in more than 10 years in the first quarter of this year.

VC fintech investment hits post-dotcom high

Payment processing companies, financial software and businesses that provide big data systems to banks proved particularly popular, with 14 of those businesses raising €166 million over the three-month period, according to data from Dow Jones VentureSource.

The previous time the sector attracted such levels of investment was the second quarter of 2000, when 42 companies raised €263 million. In the fourth quarter of last year 17 companies raised €55 million.
Financial technology – dubbed ‘fintech’ – start-ups have become increasingly popular with venture investors over the past year, as many of them attempt to transform the way consumers and institutions carry out financial tasks.

Taavet Hinrikus, chief executive of London-based money transfer start-up TransferWise, said: “Fintech is going through a renaissance and really starting to establish itself as a separate strong sector. People’s expectations have changed dramatically. Consumers have become used to much easier to use and much more transparent services in a wide variety of industries.” TransferWise has backing from several venture funds including IA Ventures, Index Ventures and Valar Ventures.

Jan Hammer, a partner at venture capital firm Index Ventures, said: “At their core, financial products are based on information, so it only makes sense that big data should radically transform the way financial products are built and transacted.”

However, Europe lags behind the US, where 36 fintech companies raised a total of $1.3 billion in the first quarter of the year.

Yann Ranchere, a director at digital financial services investment and advisory firm Anthemis Group, said: “Fintech is not different from the other tech sectors in the sense that the US is leading in terms of investments. However, Europe has plenty of potential for fintech start-ups. The regulatory situation in payment is much simpler in Europe and could prove a strong advantage.”

Overall, venture capital financing in Europe held steady in the first quarter compared with the same period last year. Companies raised €1.4 billion for 336 deals during the first quarter, which was similar to the 299 businesses that raised €1.4 billion in the first quarter of last year but down on the €1.65 billion raised for 427 companies in the fourth quarter of last year.